NEW YORK, Wednesday, July 31, 2024– The Decentralized ZKX Protocol has ceased operations.
The perpetual trading platform built on Starknet, platform announced the shutdown on Tuesday, citing low user engagement and declining trading volumes.
The announcement can be seen here.
Founded in 2021, ZKX aimed to create a scalable decentralized exchange. Despite securing $7.6 million in funding from prominent investors, the platform struggled to gain traction.
The value of the ZKX token plummeted amid low user engagement and declining revenue.
Users will have until the end of August to withdraw their funds from the platform.
The shutdown highlights the challenges faced by many DeFi projects in maintaining profitability and attracting a sustainable user base.
The full text of the announcement
With much regret, we have to announce the discontinuation of the ZKX protocol. Despite our best efforts, we have been unable to find an economically viable path for the protocol.
(1) All markets have been delisted, positions have been closed and all funds are returned to each user’s trading account.
(2) Users can transfer the funds from their trading accounts to the main self-custodial account.
(3) Self-custodial ZKX accounts are wallets on Starknet, users can withdraw through the Starkway bridge back to L1 anytime they want.
(4) The sunset period will last until the last day of August. ZKX vesting and distribution will continue after sunset on September 1st.
(5) We strongly encourage everyone to withdraw their funds before sunset through August and claim any pending STRK rewards: https://app.zkx.fi
The decision to halt operations is based on several key factors. Our user engagement has been minimal, with only a few individuals mining STRK and ZKX rewards. Consequently, trading volumes have significantly decreased, and daily revenue can barely cover a fraction of our cloud server expenses. This shortfall makes it impossible to cover salaries and other essential operational costs. Despite the market-makers’ best efforts, the high monthly payments and rebates have surpassed our revenue by substantial margin, and we will be required for higher payments starting from August.
There’s no way to sustainably support the protocol with the current value of the token either. There’s no denying the TGE didn’t meet expectations, and the resulting losses have contributed to our current situation. As major token holders exercise their right to cash out, the token’s value has continued to decline. The market is undervaluing the work done and infrastructure built by appchains and dApps coming from ecosystems like ours. Tokens are being undervalued and there is a noticeable lack of demand. There’s a broader exhaustion of the DeFi paradigm as we have seen over the past five years and is affecting the entire sector.
We started this journey in 2021 wanting to build a new generation of perp app chains that could scale as much as a CEX but offer the benefits of a DEX, we proved the viability of that. Building on Starknet was a rocky but insightful journey, which took us longer than expected as Cairo 1.0 was being developed and the new sequencer upgrades were deployed. Starknet continues to be one of the best-engineered rollups. All along, the Starkware team has been incredible and they and the Starknet Foundation have been very supportive from the start. Special mention goes to Uri, Eli, Damian, James, and Liron.
The community has shown both remarkable support and intense pressure. We appreciate the high degree of accountability that they required from us, but it has been exceptionally challenging to sustain and engage with a DeFi community in an industry that’s heavily driven by token incentives and airdrop value extraction. The airdrop and token model for dApps no longer proves effective. We’ve faced increasing pressure and, at times, felt as though we were under duress from community members. In recent months, the volume of threats and abuse has surged, alongside persistent hacking and scam attempts. Despite these challenges, we are profoundly grateful to those who have remained supportive throughout this period.
We still think there’s great value in having built an incredible infrastructure to scale perp trading transparently and safely, with account abstraction, self-custody, and data availability attached to the order book. While perps are commoditized and are no longer a product that offers a unique advantage, the code here still has value as a great DeFi application, with OG Trade being a new UX for perps that proved successful.
We thoroughly evaluated the possibility of expanding cross-chain but we realized a significant portion of the entire codebase would have to be rewritten, tested, and re-audited in Solidity, and that would carry a significant cost. Given these challenges and the substantial investment required, we have made the difficult decision to wind down the platform. We deeply appreciate the support of our community and loyal users and thank you for your understanding during this transition.
For now, this is all. We’re sorry we don’t have better news and deeply appreciate your unwavering support.
-Team
